Sunday, November 19, 2006

Governer's Health Insurance Proposal

Governor Mitch Daniels (R) is turning his attention to an issue which almost everyone agrees needs to be addressed: finding a way to insure the uninsured with health coverage. He is proposing a plan to fund a very modest state-run health insurance program with a 25 cent increase in the tax on cigarettes. I call it modest because that is what it is in comparison to the comprehensive plan Gov. Mitt Romney (R-MA) implemented with the cooperation of a Democratic-controlled legislature. You may recall that Daniels proposed a similar increase in the cigarette tax without any complimentary health insurance proposal. It struck many that he was simply using the tax to shore up the state's finances instead of looking for cuts in existing programs. The GOP-controlled legislature rejected Daniels' tax increase idea. Instead, the state was able to achieve at least the appearance of a balanced budget for the first time in many years without resorting to a tax increase.

There are aspects of the program I find very appealing. For example, the program will ensure that all children by the age of 2 are able to be immunized against childhood diseases. Indiana currently ranks 39th in the nation in childhood immunizations. Health care studies show that you save $25 in health care costs for every dollar spend on childhood immunizations. It's hard to argue the value of this wise investment in public health. The plan would also provide a form of medical care savings accounts for low-income persons of up to $1,100 per year called POWER accounts, along with $500 a year in preventive services, such as annual physicals, mammograms and colorectal screenings. The state would contribute to the accounts, along with the participants, on a sliding scale basis dependent on the size and income of the participant's family. Unspent funds could be withdrawn at the end of the year as long as a minimum balance in the account is maintained.

The major component of the plan, however, is the free insurace coverage the plan offers to low-income uninsured Hoosiers only. Eligibility will be limited to those who are uninsured and earn no more than 200% of the poverty level. For an adult without children, that would mean anyone who earns between $9,800 and $19,600. For adults with children, it could mean coverage for those earning between $9,800 and up to $40,000, increasing with the number of dependent children. The Governer's office believes up to 350,000 Hoosiers would be eligible for participation in the plan. It is not an entitlement as proposed though in the sense that you can enroll in the plan on a first-come, first-serve basis. If there are no more funds available at the time you apply for participation, you will be denied enrollment. Because the program depends on the cigarette tax for funding, if the Governor's smoking cessation program, which is also a part of this proposal, is successful, there will be less cigarette tax revenues to fund the program.

The plan offers nothing to the many self-employed workers who are currently uninsured or employees who earn more than 200% of the poverty level but who aren't offered an employer-sponsored health insurance plan. It arguably will provide an incentive to employers who pay low wages to dump their plans knowing that their employees could participate in this state-funded program. The plan requires persons to be uninsured for at least six months to discourage this, but I can't imagine that would be a big enough disincentive to a cost-conscious employer. The big winners under the plan will be health care providers, pharmaceutical companies and health insurers--the same people already making off like bandits under the current health financing structure.

The plan relies on private health insurers to administer the program. Health care providers, under the plan, will be reimbursed for their services under the rates provided by Medicare and not Medicaid. Those rates, in some instances, are 40% higher than the Medicaid rates. The Governor argues there will be loss cost-shifting than there is under the current system with more people insured. The argument is that many of the uninsured's medical bills go unpaid and higher charges are applied to those who do pay to make up the difference. Most of these unpaid bills are owed to hospitals, which are primarily nonprofit entities.

From where I sit, I find nothing nonprofit about the way these hospitals are run. They have become major corporate giants with a bunch of high-paid administrators and a penchant for constantly building newer and bigger facilities whether needed or not. It seems that a lot of the cost-shifting is to finance a life of luxury for the providers and administrators of these institutions. Until we do something to tackle the mindset which permeates our health care system that we have to keep building bigger and better facilities and passing on the costs to someone else to pay, the cost-shifting problem the Governor complains of will never be conquered. It also appears to me that the plan will capture many people who might otherwise have wound up in the Medicaid program after their medical bills spiraled out of control. Again, the big beneficiarly here is the providers who will receive much more generous payments for their services than if these same people had wound up in the Medicaid program.

The Governor's plan is a nice start, but I think he would be well advised to reach out to people other than lobbyists for doctors, hospitals, health insurers and pharmaceutical companies to develop a more successful program. When you propose a plan which is supported by all these groups out of the box as the Governor's plan is, you know it's not a good plan for the public.


Anonymous said...

I wonder if in the preventative element there is any coverage for family planning (i.e. exams, counseling, birth control pills, patch or shots, etc)

I have read that now HALF of all the births in Indiana are paid for by Medicaid. Also, a lot of us women know that a lot of health insurance doesn't even cover birth control (though births and pregnancy are?!) It would seem that is some of the pregnancies might not occur if the women had birth control (if that was what they wanted) it would be a good deal.

I hope this plan takes that into account. If they want to save money that would seem like a good idea. But I'm afraid politics is going to get in the way. There are more and more right wingers that are opposed to birth control all together (Sen. Drozda in IN has made this statement) and there have been fights and opposition to expanding Medicaid to birth control in the past based on "life begins at fertilization" (pill and IUD can prevent pregnancy after fertilization) even though it would seem the vast majority of the public favors birth control.

I hope there are enough reasonable people involved to incorporate a reasonable discussion of this.

Anonymous said...

Excellent post. Here's a short history lesson on hospital costs:

In 1977, Pres. Carter sought, and Congress provided, Health Care Cost Councils all over America. Made up of citizens and health care/hospital representatives, these councils (3 were in Indiana: north, central and south) had to OK any hospital expansions, or any expenditure over a certain amount.

The result was a three year moratorium on duplicitous hospital expenditures. Hospital room rates in Indiana were stable. In short, hospitals did not overbuild, because these councils did not permit it. Those councils also discovered that many specialists' fees were driven by hospitals' equipment purchases--it was a strange scenario: hospitals buy expensive equipment, specialists were almsot obligated to use it. And often when patients didn't need it.

An appeal procedure was established to the Secretary of HHS (HEW at the time), for any matters which the councils may have overlooked. It was rarely used.

One of Ronald Reagan's first acts, two hours after his inauguration, was to sign an executive order to disband the councils.

I'm not much for government control, but it's gotten out of hand. These councils worked.

And, as with so many things from the 80s, if Reagan hated it, it must've been good.

Anonymous said...

Which piece of "expensvie equipment" do you not want used when you arrive at the ED? Which procedures do you not want utilized when you or a family member are a patient?

As individuals and as a sociaty we must decide these questions.

The Carter councils did NOT work. In fact, the data show the late 70's were a time of particulary rapidily increasing health care costs. But a large part was driven by innovation.

The top 5% of patients are the big utilizers of health care. Smoking, obesity, diabetes, lack of pre natal care, etc.

Anonymous said...

6:17, you're just wrong.

In Indiana and in many jurisdictions where the health care councils were aggressive, room costs and related hospital costs were stagnant, and in many cases, went down slightly. The experiment worked resoundingly, unless, of course, you wanted those rates to go up with the inflation of the times: remember those 18-20% CDs?

The health cost councils were cut immediatrly, as a Reagan payback to the pharmaceutical and health-care companies who funneled millions to his campaign. As always...follow the money...and that does cut both ways.

Which ER do I want? If I am unable to speak for myself, or perhaps even if I am, I want the ambulance technicians to know which hospital best-treats my malady: burns to Wishard, heart to wherever, cancer to IU or Methodist, etc. There is no compelling reason, health-wise or cost-wise, for all hospitals to have everything in a large metro area.

Rural hospitals are different. That's a can of worms.

But regional hospitals should not duplicate expensive services. The cost of doing so is inevitably passed along to consumers and employers through higher co-pays and health insurance premiums.

Ask GM, Ford and Chrysler. They supported the councils.